Oil drops to near $49 amid weak demand outlook

SINGAPORE: Oil prices slipped to near $49 a barrel on Tuesday in Asia as traders looked to US bank results this week for signs a severe recession may have bottomed but remained pessimistic that demand for crude can recover in the near term.

Benchmark crude for May delivery fell 78 cents to $49.27 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract on Monday dropped $2.19 to settle at $50.05.

Oil prices have traded near $50 a barrel for the last two weeks after jumping from below $35 in February as investors struggle to gauge the health of a global economy reeling from its worst slowdown in decades.

Traders have been cheered by early signs that US banks may be stabilizing. Goldman Sachs reported Monday a profit of $1.66 billion for the first quarter, beating Wall Street's earnings expectations, and a huge improvement over the $2.29 billion loss that Goldman reported for the fourth quarter.

Goldman's news, released a day earlier than anticipated, came days after Wells Fargo & Co said it expected to report record first-quarter earnings of $3 billion, well above Wall Street's estimates. Banking giants Citigroup Inc. and Bank of America Corp. will report earnings later this week.

``We don't have the feeling of being in a free fall anymore,'' Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. ``But we've seen quite a big rally, so I wouldn't be surprised if stock markets and oil come down a little.''

The market was still mulling a forecast cut by Paris-based International Energy Agency, which said on Friday it now expects global demand this year will likely fall by 2.4 million barrels a day to 83.4 million barrels, or 2.8 per cent lower than last year.

``The old theme of demand destruction is still controlling crude right now,'' Moltke-Leth. ``I see a range of $47 to $53 holding for a while.''

In other Nymex trading, gasoline for May delivery fell 0.65 cents to $1.39 a gallon and heating oil dropped 0.71 cents to $1.46 a gallon. Natural gas for May delivery slid 2.0 cents to $3.61 per 1,000 cubic feet.

In London, Brent prices fell 44 cents to $51.70 a barrel on the ICE Futures exchange.